Shinsegae Inter Sells Entire Stake in Intercos (Comprehensive)

[Asia Economy Reporter Yujin Cho] Shinsegae International has sold its entire stake in Shinsegae Intercos Korea, its cosmetics original design manufacturing (ODM) affiliate.

This move is interpreted as an effort to reorganize its cosmetics business strategy through selection and concentration amid the COVID-19 crisis.

On the 7th, Shinsegae International announced that it sold its 50% stake (3,356,564 shares) in Shinsegae Intercos Korea entirely to Intercos. The sale amount was approximately 17.2 billion KRW (5,131 KRW per share).

Shinsegae International and the Italian cosmetics manufacturer Intercos established the joint venture Shinsegae Intercos Korea at a 50-50 ratio at the end of 2015. Through this share sale, Intercos now owns 100% of the company and will operate it solely.

The company stated that both parties achieved meaningful results through this joint venture and have agreed to build a new form of partnership to focus on their respective core competencies. Both sides plan to maintain a strategic alliance to secure a stable supply system mutually.

This affiliate share sale is seen as a measure to reorganize the cosmetics business strategy through selection and concentration amid the COVID-19 crisis.

A Shinsegae International official explained, "This share sale is not for securing funds or improving financial structure," adding, "It is a partial revision of the initial cosmetics business direction to reduce investment in manufacturing and strengthen the brand business."

He continued, "We have acquired know-how in cosmetics manufacturing through operating the joint venture, and based on this, we will focus on strengthening the brand business," adding, "We plan to invest intensively in acquiring or developing new brands and secure core technologies through the Technology Innovation Center."

Due to the impact of COVID-19, Shinsegae International's consolidated operating profit for the first quarter of this year was 12 billion KRW, down 59% compared to the same period last year. Sales during the same period were 323.4 billion KRW, down 11.6%, and net profit was 4.7 billion KRW, down 79.6%. The poor sales performance in the duty-free channel, which accounts for over 20% of total sales, dealt a direct blow to the earnings decline.